Petrochemical Restructuring Stalls... Internal Calls Grow at Yeocheon NCC for Restarting Third Plant

Complied With Government’s Production Cuts First
Dissatisfaction Grows as Other Companies Do Not Follow
“Chicken Game” Dynamics Raise Fears of Industry-Wide Collapse

There are growing calls for Yeocheon NCC, located within the Yeosu National Industrial Complex-the largest petrochemical complex in South Korea-to restart some of its naphtha cracking centers (NCCs) that have been shut down since August. Although the company halted operations in line with the government's petrochemical restructuring policy, it argues that it cannot continue to bear the burden alone if other petrochemical companies in the complex are reluctant to share the pain through production cuts. The government has set the deadline for restructuring within the petrochemical industry as the end of this year. However, as a "chicken game" dynamic emerges, fears of mutual destruction are resurfacing within the industry.

According to the industry on November 7, there is internal discussion at Yeocheon NCC-a joint venture between Hanwha Solutions and DL Chemical-about the possibility of restarting its third plant, which has an annual ethylene production capacity of 470,000 tons. Previously, Yeocheon NCC halted operations at the third plant in August due to deteriorating profitability caused by an oversupply of ethylene, with the condition that operations would resume once market conditions improved. After the government outlined its petrochemical restructuring plan, the company even submitted a plan to the government that included the scenario of a de facto permanent shutdown of the third plant.

Yeocheon NCC in Hwachi-dong, National Industrial Complex, Yeosu-si, Jeollanam-do. Photo by The Asia Business Daily Database

The internal push for resuming operations at Yeocheon NCC, despite ongoing market difficulties, stems from the perception that other NCCs in the complex are not making visible restructuring efforts. A company representative stated, "We have done our part," adding, "Since we have already significantly reduced production by shutting down the third plant, we cannot cut back any further."

Yeocheon NCC has reportedly begun discussions with Korea Development Bank, the Ministry of Trade, Industry and Energy, and others to develop a self-rescue plan that includes the reassignment and voluntary retirement of 153 employees. However, LG Chem continues to operate two NCCs, and Lotte Chemical and GS Caltex, each with a single facility, are maintaining operating rates in the low 80% range. As these companies have not shown any moves toward production cuts or facility closures, discontent has surfaced within Yeocheon NCC.

Within the industry, some view the rumors of Yeocheon NCC's restart as a "pressure tactic." An industry official commented, "Yeocheon NCC proactively complied with the government's request for production cuts, but as other companies have not followed suit, the perception that 'we cannot be the only ones to suffer losses' has taken hold." The official added, "The calls for restarting operations can be seen as leverage for negotiations."

However, Yeocheon NCC maintains that it is not currently considering restarting the third plant. A company representative stated, "While the possibility of restarting the third plant may be reviewed depending on changes in ethylene supply and demand, there are no current plans or internal reviews for resuming operations." The representative also emphasized, "Yeocheon NCC has formed a competitiveness enhancement task force with its shareholders and is pursuing improvement initiatives such as reducing production facilities, cutting costs, improving energy efficiency, and streamlining organizational management."

Previously, the government proposed a voluntary reduction of 18-25% (2.7-3.7 million tons) out of the total domestic NCC production capacity of 14.7 million tons. Major NCCs in Yeosu, as well as in Ulsan and Daesan industrial complexes, are subject to this plan. However, Yeosu Industrial Complex is considered to be the slowest in implementing restructuring. LG Chem discussed raw material collaboration and process integration with GS Caltex, but talks have stalled due to GS Caltex's concerns over financial impairment. Aside from Yeocheon NCC, there have been no actual cases of production cuts implemented so far.

This content was produced with the assistance of AI translation services.